UPDATE 3-UK boosts support for marine, biomass power

* Onshore, hydro can survive with lower support rates

* Centrica puts offshore wind farms under review

* Govt expects 70-75 TWh of renewables in 2017

By Karolin Schaps and Nina Chestney

LONDON, Oct 20 Britain proposed to more than
double financial support for its nascent marine energy industry
on Thursday as well as provide additional subsidies for biomass
generation, while cutting rates for more mature technologies
such as wind and hydro power.

The policy changes lifted share prices at biomass developer
Drax as high as nearly 16 percent, while prompting
utility Centrica to say it would put two offshore wind
projects under review.

"Where new technologies desperately need help to reach the
market, such as wave and tidal, we're increasing support. But
where market costs have come down or will come down, we're
reducing the subsidy," said Energy and Climate Change Secretary
Chris Huhne.

Britain sees its growing marine energy industry as a key
technology to become a clean technology leader, an ambition that
was undermined on Wednesday when the government said it had
dropped funding for its first carbon capture and storage (CCS)
project.

Tidal stream and wave energy projects of up to 30 megawatts
(MW) will receive five so-called Renewable Obligation
Certificates (ROCs) per megawatt-hour (MWh) from April 1, 2013
per year, compared with two currently.

ROCs allow project operators to collect a support fee for
generating green power, on top of wholesale power prices, which
is eventually paid by the energy consumer.

"This decision will ensure that the marine energy industry
can begin to move towards commercial scale exploitation and that
the UK can retain its position as a global leader," said Andrew
Tyler, the developer of the world's only operational full-scale
commercial tidal current turbine located in Northern Ireland.

Developers of biomass plants, such as Britain's Drax and GDF
Suez's International Power have been eagerly awaiting
the review.

Thursday's proposals create a new band for enhanced co-fired
biomass/coal plants, which will be rewarded one ROC per MWh pr
year, while annual rewards for existing co-firing will remain at
0.5 ROC.

"The proposed level of 1.0 ROC/MWh for enhanced co-firing
will enable us to increase our co-firing, but we would need a
moderate uplift to maximise our potential for producing this
low-cost renewable electricity," said Dorothy Thompson, chief
executive of Drax, whose shares were up 9.7 percent at 1518 GMT.

The government said the steady power generation nature of
biomass was a benefit as a renewable energy source that comes
without the intermittency that creates challenges in the
management of wind and solar power.

WIND, HYDRO SUPPORT CUT

Onshore wind farms and hydro installations have seen
stronger growth in the UK, and the government concluded that
cutting support rates would not adversely affect them.

Hydro power annual support levels are proposed to be halved
to 0.5 ROC, and onshore wind would see a 10 percent cut to 0.9
ROC. Support levels for offshore wind will fall 10 percent below
current figures to 1.8 ROCs in 2016/17.

"The proposal to reduce the support mechanism for offshore
wind and other technologies means we need to re-examine the
economics of the projects we have in our planning pipeline,
including our next two offshore wind projects," said Mark
Hanafin, managing director at Centrica Energy.

The projects under review are the Race Bank and Docking
Shoal offshore wind farms with a combined capacity of 1,000 MW,
a spokesman said.

The review proposals are open to consultation until Jan 12,
2012.

The new green energy support proposals will add 50 pounds
($79.16) on average to British energy bills in 2016, compared
with 52 pounds if no changes were made, the government said.

The buyout price per ROC in 2011-12 is set at 38.69 pounds.

The government expects to see 70-75 TWh of renewable
electricity output in the UK by 2017. Renewable energy accounted
for 54 TWh (3.3 percent) of the UK's total energy consumption in
2010, having increased by 15 percent between 2008 and 2009,
according to the Department of Energy and Climate Change.

Britain has a target to generate 15 percent of its energy
consumption from renewable sources by 2020, compared with 7.4
percent reached in 2010.

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